Shares of Karnataka Bank plunged more than 7% on June 30, as investors reacted sharply to the resignations of two key top-level executives.
In a surprise development over the weekend, the bank’s Managing Director & CEO Hari Hara Sarma, along with Executive Director Sekhar Rao, stepped down citing personal reasons.
The lender also announced that Sarma’s resignation will be effective July 15, while Rao will exit on July 31. While both executives cited personal reasons in their resignation letters, media reports hint that internal differences with the bank’s board may have played a role in their exit.
Sarma, in his resignation letter, mentioned a personal decision to relocate back to Mumbai as a key reason for stepping down. Rao, on the other hand, pointed to his inability to relocate to Mangaluru, where the lender is headquartered, along with other personal reasons.
However a report by Moneycontrol highlighted internal differences between Sarma, Rao, and the bank’s board over an unapproved expenditure. These differences reportedly surfaced in May after the bank’s statutory auditors flagged ₹1.53 crore spent on engaging a consultant and related purposes.
According to the auditors’ notes, the expenditure exceeded the authority limits of the bank’s whole-time directors and was not ratified by the board. As a result, the auditors stated that the amount was “recoverable from the concerned directors.” The consultancy expenses were said to be directed toward technology upgrades and a revamp of the bank’s credit verticals.
Meanwhile, to manage the leadership vacuum, the bank has formed a search committee tasked with identifying suitable candidates for both top roles. In the interim, Karnataka Bank has appointed a seasoned senior banker as Chief Operating Officer (COO), who will take charge on July 2, 2025. The bank also noted that additional substitute arrangements are being put in place, pending regulatory approval.
